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Finance

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  • January 27, 2023
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Floored Floater

A floater that provides capital guarantee to the holder (it is a capital guaranteed product). It pays a yearly, semi-annually or quarterly coupon depending on the performance of an floating rate such as the 3-month LIBOR. Moreover, if the floatng rate is lower than a predetermined floor, then the level of the coupon will be determined by that floor.

Floored floaters are instrumental in a rising rate environment as they pay a minimum fixed coupon, and a variable rate if the floating rate is higher than the floor.

Floored floaters belong to the fixed income asset class.


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